Wednesday, March 5, 2014

Upshot From Cowen Call? Merck Has 31 Cancers Targeted; 13 Studies Underway -- On MK-3475 -- Pembrolizumab

Nothing truly material. Just about as I expected.

But the additional CFO-seat's gloss on the Anti-PD-1 MK-3475 program (spending about $2 billion per quarter, now!) -- is that there are 13 different clinical trials, as mono- and combo- therapies -- targeting 31 different oncology needs -- with various partners.

That's a big bet. Mr. Kellogg also said in a note of caution -- "it is too early to say" who has the lead here -- and pointed to ASCO in Chicago on June 1, 2014 for more data-driven windage on that. Even so, Merck now believes it will have its "rolling" submission packet at FDA for the melanoma indication completed by June 30, 2014.

That doesn't mean quick approval, though -- it means the FDA may then schedule an Advisory Committee meeting to consider the candidate -- in late August or early September, soonest.

Then maybe six to eight weeks after that vote, there might be an "approvable" letter to Whitehouse Station. And, who knows who else will be in the very same time-lined FDA cue (cough -- BMS's Nivolumab program(?) -- but for differing oncologic needs)? We shall see, come June 2014. Done shoveling (again)! Whew.


Anonymous said...

In 2014 guidance, Merck stated that R&D expenditures will be less than in 2013 (< $7.5 billion). Given that it looks like PD-1 will consume at least this much, how does Merck get R&D spend for the year to less than that figure??

Condor said...

That's a GREAT question, Anon.!

It is certainly true that Merck is aggressively cutting away what it now deems "non-core" R&D. It is also true that Merck is outright selling off, or out-licensing the rights to other large chunks of the developed research/drug candidates. And that will generate some off-setting revenue, to match the increased expenses under the pemrolizumab "super-sizings" -- of clinical trials (13 in total -- Wow!).

I suppose there is a ALSO defensible GAAP based accounting argument -- as to some of the trials -- since some are coupled to existing market leading approved drugs of other companies, that they are more like "marketing pre-spend," and thus go into a reserve against some future sales revenue accounts.

That might be a bit of a stretch, but these studies are much less pure research, and are much more akin to "pre-paid marketing" spend -- when coupled to a current "on market leader" -- in solid organ tumor treatments, for example.

I'm not saying that they are using "creative" accounting, per se -- but there are probably reasonable arguments to be made here.

Thus, they may shift some of this big spending out of the R&D buckets altogether.

But it will be entertaining to watch and see whether the company hits that goal -- reducing R&D spend overall.

They could also say, once the FDA approval is in, on MK-3475 -- we upspent -- but we got. . . a mega-blockbuster.

Wall Street won't complain (too bitterly) about that. Should it all pan out, of course.

Namaste -- do stop back!

[Typos cleaned up.]